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Item 9A. Controls and Procedures

2025-05-28 compared with 2024-06-28 · 48 added, 77 removed, 108 unchanged (54% of the section changed)

3 unchanged sentences

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of March 31, 2025.

Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of March 31, 2024.

Nevertheless, based on the performance of additional procedures by management designed to ensure reliability of financial reporting, our management has concluded that, notwithstanding the material weaknesses described below, the consolidated financial statements, included in this Annual Report on Form 10-K, fairly present, in all material respects, our financial position, results of operations, and cash flows as of the dates, and for each of the periods presented, in conformity with U.S.

Based on that evaluation, our management concluded that our disclosure controls and procedures were effective as of March 31, 2025.

Management's Annual Report on Internal Control Over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.

Our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States.

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Management evaluated the effectiveness of our internal control over financial reporting as of March 31, 2025, using the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.

Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of March 31, 2024 due to the material weaknesses described below.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified a material weakness in the design of our controls over accounting for complex and non-routine transactions.

Specifically, Management did not have adequate supervision and review controls over the complex accounting for goodwill impairment and acquisitions.

This material weakness did not result in an error in any of our previously issued consolidated financial statements including the consolidated financial statements as of and for the year ended March 31, 2024.

Management identified a material weakness in the design of our controls over determining the useful lives of our recently acquired intangibles.

Specifically, while still in the measurement period related to the acquisition of GKE, Management selected a useful life related to customer relationships acquired in the GKE acquisition, but there was evidence that a longer useful life may be appropriate.

This material weakness did not result in a material error in any of our previously issued consolidated financial statements including the consolidated financial statements as of and for the year ended March 31, 2024.

Additionally, during the year ended March 31, 2024, Management identified that several change management and logical access controls related to our enterprise resource planning tool were not operating effectively for portions of the year ended March 31, 2024.

The failure of these information technology general controls extended to automated application controls across portions of financial reporting and business transaction cycles which rely upon the affected information technology application controls.

This combination of control deficiencies indicates that there is a reasonable possibility that a material misstatement could fail to be detected on a timely basis.

Upon discovery of the failures, Management performed reviews of system data to ascertain whether change management processes had been used inappropriately and identified no instances of misuse of roles or unapproved changes to the enterprise resource planning tool.

Management promptly initiated corrective actions to remediate the deficient controls that resulted in the material weakness;

however, there are insufficient instances of each control having operated to evidence remediation of each control deficiency that aggregated to the material weakness.

This material weakness did not result in an error in any of our previously issued financial statements, including the consolidated financial statements as of and for the year ended March 31, 2024.

Remediation Plans

Following identification of the material weaknesses, and as part of our commitment to strengthen our internal control over financial reporting, we are implementing remedial actions under the oversight of the Audit Committee of our Board of Directors to address our material weaknesses.

Technical accounting related to non-routine transactions

On highly-technical, non-routine and complex accounting transactions, we will begin to engage third-party advisors with the requisite skills and technical expertise to assist us in an appropriate combination of assessing, performing or reviewing such transactions.

Specifically, we intend to:

identify non-routine transactions that arise and evaluate whether the transaction warrants additional advisor oversight or validation of analyses based on complexity or changes in applicable regulations;

identify and select qualified third-party advisors, ensuring that those advisors have adequate knowledge to prepare or review the specific complex accounting transaction contemplated;

ensure that third-party providers follow a process that incorporates appropriate review controls;

perform a final internal review over the work of third parties to ensure Management consensus with the work product.

Assessment of useful lives of recently acquired intangibles

During the first quarter of fiscal year 2025, during the measurement period related to the GKE acquisition, we will modify the useful life of our customer relationship intangible and record a cumulative effect true up to release amortization expense.

Information technology general controls

Management has modified the reports used as source data to test change management in its enterprise resource planning tool.

Additionally, Management has designed a control to enhance its review of roles, particularly those with ability add, edit, or delete transactions.

We believe that executing these steps will provide sufficient evidence to remediate the deficiencies related to operating effectiveness and design of our controls.

Management intends to thoroughly evaluate the design of its information technology application controls related to its enterprise resource planning tool and other in scope systems during its fiscal year 2025.

Management may leverage the use of a third party specialist to accomplish this evaluation.

We will continue to monitor the design and operating effectiveness of these and other processes, procedures and controls and make any further changes management determines appropriate.

Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of March 31, 2025.

Our CEO and CFO have certified that, based on their knowledge, our consolidated financial statements and other financial information included in this Annual Report on Form 10-K (“Form 10-K”), fairly present, in all material respects, our financial condition, results of operations and cash flows as of, and for, the periods presented in this Form 10-K.

Prior Year Material Weakness

As disclosed in Part II Item 9A.

Controls and Procedures in our annual report on Form 10-K filed with the Securities and Exchange Commission on May 30, 2023 for the year ended March 31, 2023, we identified two material weaknesses in internal controls:

1) Management's review controls over fair value calculations, including Management's preliminary valuation of the Belyntic Acquisition were insufficient.

Specifically, Management failed to utilize resources with an appropriate level of knowledge and expertise in performing and reviewing the fair value calculations.

2) Management's review controls over the qualitative assessment of goodwill impairment were insufficient to identify potential impairment triggers.

Controls and Procedures in our annual report on Form 10-K filed with the Securities and Exchange Commission on June 28, 2024 for the year ended March 31, 2024, we identified three material weaknesses in internal controls:

Controls over technical accounting for complex and non-routine transactions - We did not have adequate supervision and review controls over complex technical accounting matters.

Controls over determining the useful lives of our recently acquired intangibles - During the GKE acquisition's measurement period, we selected a useful life over which to amortize acquired customer relationships, but there was evidence that a longer useful life may be appropriate.

Certain controls related to change management and logical access – Our risk assessment process was insufficient and as a result, we did not design adequate controls related to logical access for our enterprise resource planning tool.

In addition, certain controls designed to provide comfort over change management were not operating effectively for a portion of the year ended March 31, 2024.

Remediation Status for Prior Year Material Weaknesses in Internal Control Over Financial Reporting

In response to the material weaknesses identified in the prior year we, with the oversight from the Audit Committee of the Board of Directors, developed a plan to remediate the material weaknesses.

Our remediation plan required that:

1) Management will utilize a valuation specialist with the requisite knowledge to perform such valuations for all acquisitions of businesses.

2) Members of Management with requisite knowledge perform formal quarterly analyses of potential impairment triggers.

As a result of control activities performed during fiscal year 2024, we concluded that the material weakness regarding fair value calculations was remediated as of June 30, 2023, and the material weakness regarding goodwill impairment assessments was remediated as of September 30, 2023.

We will continue to perform formal quarterly impairment trigger analyses in future periods.

We will likewise continue to utilize a valuation specialist with the requisite knowledge to perform valuations for all future acquisitions of businesses, as such acquisitions occur.

RSM US LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Form 10-K, has issued an unqualified opinion on our consolidated financial statements and has issued an attestation report on our internal control over financial reporting as of March 31, 2024 within Item 8.

Following identification of the material weaknesses, and as part of our commitment to strengthen our internal control over financial reporting, we implemented remedial actions under the oversight of the Audit Committee of our Board of Directors to address our material weaknesses:

Technical accounting for complex and non-routine transactions – Management implemented criteria under which to evaluate technical accounting transactions to determine those that require the assistance of a third-party specialist.

In the first quarter of fiscal year 2025, we identified two transactions that met our criteria for requiring a specialist:

1) the partial repurchases of the Notes, and 2) the amendment and modification of our Credit Facility.

We identified and selected qualified third-party advisors, including validation that that the advisors possessed adequate knowledge to address the complexities of the applicable technical accounting matters, and we ensured analyses were appropriately reviewed, ensuring consensus on accounting conclusions.

Following the execution of our remediation plan for these transactions, management concluded that the material weakness was remediated.

In subsequent transactions during the year, including the quantitative impairment analysis performed over our five reporting units, Management utilized a qualified third party specialist to assist with technical accounting matters, including reviewing Management’s conclusions.

Assessment of useful lives of recently acquired intangibles - We modified the useful life of our customer relationship intangible and recorded an immaterial cumulative effect true-up to release amortization expense during the three months ended June 30, 2024.

Following the execution of our remediation plan related to the useful lives of recently acquired intangible assets, management concluded that the material weakness was remediated.

Information technology general controls ("ITGCs") - In fiscal year 2024, our risk assessment process was insufficient, and as a result, we did not design user access controls covering our ERP that operate at an adequate level of precision to appropriately identify the user groups tested in certain of our other logical access and change management controls.

In addition, certain logical access and change management controls were not operating effectively for portions of fiscal year 2024.

Management performed the following procedures to remediate the material weakness in internal controls over ITGCs:

Engaged a third-party specialist to assist in remediating our material weakness.

The third party:

(i) provided templates to assist in robust controls documentation, (ii) provided training to key personnel responsible for performing controls, and (iii) evaluated the design of our ITGC controls and our risk assessment documentation.

Implemented new controls over logical access, engaging a third-party expert to extract user access and permission data from our enterprise resource planning tool.

Using this data, we made changes to permissions and roles to ensure that adequate segregation of duties and appropriate permissions were present.

Evaluated and modified the reports used as source data to test change management and logical access controls in our enterprise resource planning tool, and improved the documentation of our conclusions to more clearly demonstrate the completeness and accuracy of the data, which has allowed us to conclude that the related controls were operating effectively at March 31, 2025.

Following the execution of our remediation plans, management has concluded that the material weaknesses have been remediated.

Moss Adams LLP, the independent registered public accounting firm that audited our consolidated financial statements as of March 31, 2025 and for the year then ended, is appointed by the Audit Committee of our Board of Directors.

Moss Adams LLP has issued an unqualified opinion on our consolidated financial statements and has issued an attestation report on our internal control over financial reporting as of March 31, 2025 within Item 8.

Financial Statements and Supplementary Data in this annual report on Form 10-K.

Changes in internal control over financial reporting

We acquired GKE in the third quarter of our fiscal year 2024.

The financial results of each of these acquisitions are included in our audited consolidated financial statements as of March 31, 2024.

The Company's total assets as of March 31, 2024 include $113.5 million from GKE.

The Company's consolidated revenues for the year ended March 31, 2024 includes $9.2 million from GKE.

As the acquisition occurred in the third quarter of fiscal year 2024, the scope of our assessment of our internal control over financial reporting does not include the acquisition.

This exclusion is in accordance with the Securities and Exchange Commission’s guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition.

Other than the items discussed above, there were no other changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three and twelve months ended March 31, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Except the remediation of the prior year material weakness related to ITGCs as described above, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

The following of our directors or officers entered into written plans for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5 - 1 (c) (each, a "trading arrangement") on the dates indicated:

Chief Financial Officer John Sakys entered into a trading arrangement on March 3, 2025 .

The trading arrangement is effective through June 30, 2026 , and contemplates that Mr.

Sakys may sell 5,000 shares of Mesa Labs’ common stock, and further, may exercise 4,087 non-qualified stock options and sell the resulting 4,087 shares of Mesa Labs' common stock, subject to certain conditions.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Includes shares issuable in connection with awards with performance conditions, which will be issued based on achievement of performance criteria associated with the awards, with the number of shares issuable dependent on our level of performance.

We have accounted for the shares based on the current achievement as of March 31, 2024.

We have accounted for the shares based on actual achievement, if known, or based on maximum possible achievement if performance and/or market conditions remain uncertain as of March 31, 2025.

The weighted average exercise price in column (b) includes the weighted average exercise price of options only.

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Principal Accountant Fees and Services

RSM US LLP , Los Angeles, California , PCAOB ID 49 is the Company's independent registered public accounting firm.

Plante & Moran, PPLC, Denver Colorado, PCAOB ID 166 was the Company's independent registered public accounting firm from 1986 to 2023 and issued opinions on prior period amounts presented in this Form 10-K.

Incorporated by reference from the definitive Proxy Statement for our 2024 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2024.

Moss Adams LLP , Los Angeles, California , PCAOB ID 659 is the Company's independent registered public accounting firm.

RSM US LLP, Los Angeles, California, PCAOB ID 49 was the Company's independent registered public accounting firm from 2023 to 2024 and issued opinions on prior period amounts presented in this Form 10-K for the fiscal year ended March 31, 2024.

Plante & Moran PLLC, Denver, Colorado, PCAOB ID 166 was the Company's independent registered public accounting firm from 1986 to 2023 and issued opinions on prior period amounts presented in this Form 10-K for the fiscal year ended March 31, 2023.

Additional information is incorporated by reference from the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders or an amendment to this report to be filed no later than 120 days after March 31, 2025.

Exhibits and Financial Statement Schedules

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Consolidated Statements of Operations - Years ended March 31, 2025, 2024 and 2023

Consolidated Statements of Comprehensive (Loss) - Years ended March 31, 2024, 2023 and 2022

Consolidated Statements of Comprehensive Income (Loss) - Years ended March 31, 2025, 2024 and 2023

Consolidated Statements of Stockholders' Equity - Years ended March 31, 2025, 2024 and 2023

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All financial statement schedules have been omitted either because they are not applicable or required, or the information that would be required to be included is disclosed in the notes to the Consolidated Financial Statements.

Open Market Sales Agreement SM dated April 5, 2022 by and among Mesa Laboratories, Inc and Jeffries LLC (incorporated by reference from the Company's Current Report on Form 8-K filed on April 5, 2022).

Amended and Restated Articles of Incorporation of the Company (incorporated by reference from Exhibit 3.1 to the Company's Current Report on Form 8-K filed on August 25, 2023).

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Form of 2014 Equity Plan Option Award Agreement as amended (incorporated by reference from Exhibit 10.3.2 to the Company's Quarterly Report on Form 10-Q filed on July 31, 2018).

Form of 2014 Equity Plan Restricted Stock Award Agreement (incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 11, 2018).

Form of 2023 Performance Stock Unit Agreement, issued under the 2021 Equity Plan (incorporated by reference from Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 4, 2022).

Form of 2020 Performance Share Unit Agreement, issued under the 2014 Equity Plan (incorporated by reference from Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on July 30, 2019).

Form of 2021 Restricted Stock Unit Agreement, issued under the 2014 Equity Plan (incorporated by reference from Exhibit 10.3.6 to the Company's Annual Report of Form 10-K filed on May 31, 2022).

Form of 2021 Equity Incentive Plan Option Award Agreement (incorporated by reference from Exhibit 10.3.7 to the Company's form S-8 filed on August 30, 2021).

Form of 2021 Equity Incentive Plan Restricted Stock Unit Agreement (incorporated by reference from Exhibit 10.3.8 to the Company's form S-8 filed on August 30, 2021).

Form of Confidentiality, Non-Compete and Non-Solicitation Agreement (incorporated by reference from Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed on July 31, 2018).

Form of 2024 Performance Stock Unit Agreement, issued under the 2021 Equity Incentive Plan, as Amended.

Form of 2025 Performance Stock Unit Agreement, issued under the 2021 Equity Incentive Plan, as Amended.

First Amended and Restated Executive Employment Agreement dated as of September 29, 2021, by and among Mesa Laboratories, Inc.

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Mesa Laboratories, Inc.

Insider Trading Policy and Standards with Respect to Confidentiality and Certain Securities Transactions

Insider Trading Policy and Standards with Respect to Confidentiality and Certain Securities Transactions (incorporated by reference from Exhibit 19.1 to the Company's Annual Form 10-K filed on June 28, 2024).

Subsidiaries of Mesa Laboratories, Inc.

Consent of Moss Adams LLP.

Consent of RSM US LLP.

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Mesa Laboratories, Inc.

Executive Compensation Clawback Policy

Executive Compensation Clawback Policy (incorporated by reference from exhibit 97.1 to the Company's Annual Form 10-K filed on June 28, 2024).

Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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Form 10-K Summary

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MESA LABORATORIES, INC.

June 28, 2024

Chief Executive Officer

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Chairman of the Board of Directors

June 28, 2024

Chief Executive Officer, President, and Director

June 28, 2024

Chief Financial Officer and

June 28, 2024

Chief Accounting Officer, and Treasurer

/s/Jennifer S.

June 28, 2024

/s/Shannon M.

June 28, 2024

/s/Tony Tripeny

June 28, 2024

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures